Flying the Competitive Skies

August 21, 1993

Question: Why does it cost only $39 to fly to Chicago but 10 times as much to fly the same distance to another city?

Answer: Competition.

Airline fare structures have long been the bane of the frequent flier, particularly the business traveler who often buys tickets at the last minute and almost never stays away over a weekend. It is often no more expensive for a vacationer to fly to the West Coast than it would be for the same person to make a business trip to, say, Nashville. That will continue to be true -- at least for some time -- but other dramatic changes are in the offing here in Baltimore.

The first signs came this last week when a mini-fare war broke out between Southwest Airlines and some of the established carriers at Baltimore-Washington International Airport. Southwest, a low-cost carrier, will start flying from BWI to Chicago and Cleveland next month. USAir, the dominant airline at BWI, tried to undercut some of Southwest's fares, and Southwest responded in kind. Continental Airlines joined the fray and, for a brief moment, undercut both of them.

There may be more of this sort of price-slashing on these particular routes, but that is not the real significance of what is happening at BWI. Southwest's impending arrival at the airport alters the framework of air travel here. Its no-frills approach to service -- no advance seating, no meals in flight, no baggage transfers, no inter-airline ticketing -- gives it a much lower cost structure than competitors. As a result, it can charge much lower fares and still make a profit. In fact, it is the only large airline in this country that has made a profit in the last four years.

That's fine for Southwest's stockholders and for travelers fortunate enough to be heading for the carefully selected cities the airline chooses to serve. But it also has dividends for BWI itself and for the state's economy in general. Virtually everywhere it has gone, Southwest (and comparable no-frills airlines) has greatly increased air traffic. It doesn't just attract passengers from other airlines; it weans them from surface transportation as well. The growth in passengers often spills over to other airlines. BWI officials are working hard to convince Washington-area travelers that they are better served there than at congested National and remote Dulles airports. Southwest bolsters their case.

There can be too much of a good thing. Destructive competition that undermines USAir would be a blow to BWI and the state economy. Southwest will never serve all cities Marylanders need to visit. USAir's hub operation is vital to BWI. So is a dose of competition to keep it on its toes.